Since Gold reached an all-time high of $1,923 in 2012 it is still down 33 percent in dollar terms. As global central banks started their easing efforts, gold now paints a much different picture in euros, yen and Canadian dollars.

“Gold is priced in dollars, so when a currency goes down against the dollar, there is an automatic reaction: Gold will go up in that currency,” explains Simon Mikhailovich of the Tocqueville Bullion Reserve Fund.

Let’s take the euro for example. After the European Central Bank (ECB) launched a quantitative easing program on January 22, it is now trading at levels not seen since 2003 ($1.12, down 7 percent this year).

Gold in euros, however, has rallied almost 30 percent, only 20 percent away from its all-time high of 2012. Mr. Mikhailovich thinks the move in currencies is based on relative confidence in different central banks. The Fed, which stopped its QE program, and the dollar have the upper hand at least for now.

There will be a time when gold goes up against the dollar but the dollar might still go up against those other currencies

— Simon Mikhailovich, Tocqueville Bullion Reserve Fund

Other currencies which have declined against the dollar and have seen massive gold rallies are the Japanese yen (a fraction off its all time high of 157,735 yen in 2013), the Russian Ruble (hitting a new all time high at 82,816 ruble) as well as the Canadian dollar (1,608, up 15 percent since Jan. 1).

So despite the relative stability of gold in dollar terms over the last couple of years, these moves prove that if your currency is in trouble, gold protects you from devaluation. According to Mikhailovich, it is only a question of time when the dollar itself will come under pressure.

“The strength of the dollar is only relative strength against other fiat currencies that are being debased. At some time there will be a moment of clarity where people realize the dollar is only a safe haven when compared against other fiat currencies,” he says. At this point, gold will rise against the dollar and other currencies.

“There will be a time when gold goes up against the dollar but the dollar might still go up against those other currencies,” he adds.

At this moment, only the Swiss franc is going up against every other currency and consequently gold. After the Swiss National Bank unpegged its currency from the euro, the franc shot through the roof and gold denominated in Swiss francs is down 5.4 percent this year.

For Mr. Mikhailovich, the Swiss move was a decisive moment: “What happened in Switzerland will be seen in retrospect as the beginning of the end of the central banking united front. “

He says global central banks have been collaborating worldwide by implementing successive easing cycles. When one central bank stopped easing for some time, another one would take over. Not so anymore.

“Cartels don’t last if one member has broken ranks. The SNB had to break ranks, it couldn’t hold the line.”

Extreme Sentiment

As for how long this move will continue, sentiment specialist Peter Atwater, president of Financial Insyghts, warns we are reaching extreme levels.

“We are at a very major inflection point that is likely to catch a lot of market participants offside. The actions by the ECB on Jan. 22 are coming at the very end of a massive decline in the euro, not at the beginning of one.” This is true as the euro started its decline from 1.39 in April of last year, when the ECB started talking about unconditional QE.

He also views the move of the SNB as a turning point but negative for the dollar and positive for the euro. “When I see the SNB capitulate and that is what they did Jan. 15, when you see a central bank capitulate that’s an indication of a market extreme. You see the same thing with the ECB. You will see higher rates in European Sovereign bond yields,” he adds.

However, he concedes that while sentiment might require a reversal in the short term, fundamentals will probably push the dollar and gold higher.

“I think gold rallies in dollars. You have got a very depressed instrument in gold right now, but I think it has considerably further to go.”